National economic challenges and rising interest rates started to impact New Jersey’s life sciences market during the first quarter of 2023, according to a new report from CBRE.
During Q1, New Jersey posted an availability rate for lab/research & development space of 8.3%, an increase from the 7.4% the market posted in the fourth quarter of 2022. In fact, CBRE data found that lab vacancy increased across the Top 13 U.S. life sciences markets in the first quarter, providing relief for companies that had found little available space in recent years.
“Despite obvious challenges ahead, the life sciences sector in New Jersey continues to perform incredibly well,” Tom Sullivan, senior vice president at CBRE, said. “While we are seeing less venture capital, employment continues to be strong, as is demand for quality lab space.”
Given its status as the country’s fourth-largest life sciences market, New Jersey is a major center for the pharmaceuticals and biotech businesses. There are currently six major tenants in the market seeking approximately 440,000 square feet of Class A lab/R&D space, but only 400,000 square feet available to meet demand. The 400,000-square-foot BeiGene biologic pharmaceutical manufacturing center is scheduled for completion in Q2 2023 and will serve as the firm’s flagship location. In addition, Infinity Biologix is expanding its Sampled SMART Labs facility in Piscataway, creating a state-of-the-art, 140,000-square-foot lab and biorepository that will be one of the largest of its kind in the world when completed later this year. No other development is currently on the horizon.
CBRE said that among the largest lease transactions in the state in the first quarter was Roche Molecular Systems’ 82,000-square-foot renewal in Branchburg. The top sale transaction was Onyx/Machine Investment Group’s acquisition of 1.4 million square feet in the Parkway North submarket and Ares Industrial RE Income Trust’s $7.7 million acquisition of a 50,000-square-foot facility in Princeton.
Nationally, lab vacancy increased across the Top 13 U.S. life sciences markets in the first quarter, providing relief for companies that had found little available space in recent years. Average vacancy of 6.7% in the first quarter marked an increase of 170 basis points from a year earlier. That compares to an average of 7.7% in the first quarter of 2020, before the pandemic sparked a wave of activity in the life sciences sector. The low point for vacancy (4.6%) came during the second quarter of 2022.
Other measures differed in the first quarter, indicating a sector cooling to red-hot from white-hot. Despite announcements of layoffs, U.S. life sciences employment increased by 3.5% in February from a year earlier, exceeding the overall job growth rate of 2.9%.